Home > About Us > Chairman’s Statement

On behalf of the board of directors (the “Board” or the “Director(s)”) of China Agri-Products Exchange Limited (the “Company”, together with its subsidiaries, collectively the “Group”), I am pleased to present to our shareholders the annual report for the year ended 31 December 2017. During the year under review, the Group recorded a turnover of approximately HK$790 million, representing an increase of approximately 31% as compared to approximately HK$603 million in 2016. The Group’s profit from operations before fair value changes and impairment improved from approximately HK$37 million in 2016 to approximately HK$74 million this year. Loss attributable to owners of the Company significantly reduced by approximately 54% or approximately HK$400 million to approximately HK$341 million. The decrease in loss was mainly due to a turnaround from net loss in 2016 to net gain in 2017 attributable to fair value of investment properties.

BUSINESS ENVIRONMENT

2017 marked a crucial year for the implementation of the “13th Five-Year Plan” and the structural adjustment and economic reform under the new normal. The Chinese government focused on advancing the upgrade and transformation of agricultural markets throughout the country, strengthening the development of infrastructure and ancillary services, and improving the trading system, so as to further optimize the product and industry structure. Industry players were also encouraged to implement “Internet Plus” strategy to step up the infrastructure of the agri- products exchange platform, which fosters tighter connection between the production and consumption ends of agricultural products, so as to stimulate their domestic and overseas sales to further strengthen the branding, positioning and speciality of Chinese agricultural products in the international market. Meanwhile, the advantages and functions of the agricultural product exchange markets grew alongside with China’s “Belt and Road Initiative” to line up wholesale markets or buyers within the ASEAN region, realising multilateral trading of their advantageous agricultural products.

In addition, the No.1 Central Document denotes the importance of strengthening new industries, revamping businesses and expanding the value chain of the agricultural industry, including the capability enhancement of sustainable agricultural development, with the introduction of a series of policies and arrangements on land usage, financing and talent development to encourage industry innovation, which brings significant opportunities for the development of agriculture-related economies. In order to grasp the huge opportunities that may arise from these policies, the Group strived to expand its business network of agricultural produce exchange markets, deepened the application of e-commerce, and made strategic arrangement for big data technology utilisation.

BUSINESS REVIEW

The Group adopted the asset-light operation strategy and integrated external and internal resources to further strengthen the Group’s overall competitive advantage through enhancement of corporate image and brand value and improvement of supplier management, customer relations and quality control. In 2018, the Group managed 11 agricultural produce exchange markets, including the newly opened one in Suizhou city of Hubei Province, the People’s Republic of China (the “PRC”), all of which are strategically located in favourable locations of the PRC (i.e. Wuhan city, Yulin city, Luoyang city, Xuzhou city, Puyang city, Kaifeng city, Qinzhou city, Huangshi city, Huai’an city, Panjin city and Suizhou city), generating stable income to the Group. Meanwhile, the Group continued to analyse its operations and trading data collected through its O2O agricultural produces e-commerce platform “gdeng.cn (谷登農批網)” and two smartphone applications namely “NSY (農商友)” and “NST (農速通)”, for better understanding of the trading patterns and sources tracking of agricultural products with a view to planning our marketing strategy, improving food safety and reducing operating cost.

BUSINESS DEVELOPMENT

Operation and Sales of Properties in Agricultural Produce Exchange Markets in the PRC

Apart from establishing an agri-cultural exchange market through land auction, the Group took up the management rights of Suizhou market in Hubei Province, the PRC, in collaboration with the property owner as local partner. Suizhou market is expected to mature under the Group’s strategy and contribute revenue to the Group in 2018. The Group will continue to optimize its business development in response to the government policies. Based on the Group’s successful track record and market potential, the management believes that the operating agricultural produce exchange markets will bring stable growth in return to the Group in the coming year, and will continue to promote the Group’s overall branding within Greater China.

Asset Light Operation Model

Currently, shortage of agricultural land supply in China has led to surge of both the price of agricultural lands and the production cost of agricultural products. The Group has diversified from land acquisition to land lease operational arrangements while introducing strategic joint venture partnership in an attempt to reducing the capital pressure during business expansion and strengthening the Group’s cash flow.

Big Data Analysis

During the year under review, in response to the call for the implementation of the “Internet Plus” strategy, the Group continued to optimize the functions of O2O agricultural produce e-commerce platform “gdeng.cn(谷登農批網)” and two smartphone applications namely “NSY(農商友)” and “NST(農 速通)”, and made plans to invest in big data analysis to utilize sophisticated data analytics processing technology to identify trading trends and optimize the portfolio of agricultural product tenants, so as to increase transactions volume. Meanwhile, the Group accelerated the development of quality control and safety traceability system of agricultural products to improve quality, safety and standardization of agricultural products. Big data analysis is the key direction for future development of the agricultural product industry. The accumulation and processing of big data will be conducive to enhancement of the Group’s core competitiveness and resilience.

FUND RAISING ACTIVITIES

In order to meet the financing need of the Group, the Company completed a rights issue on 19 December 2017 and raised net proceeds of approximately HK$697 million for repayment of debts and its general working capital purposes.

CORPORATE STRATEGY

Looking ahead, as a leading agricultural products logistics and warehouse operator in China, the Group will continue to expand its agricultural produce exchange market business and optimize the Group’s assets and resources distribution, enhancing the Group’s flexibility in operation and future expansion plan with its asset-light operation strategy. As mentioned in the article “Preview of Central Rural Work Conference: Rural Revitalization Strategy” issued by the Chinese government last year, the “Three Rural Issues” is on the top of the agenda to advance rural revitalization strategy and speed up the alignment in various aspects between small scale farmers and modern agriculture. Responding to the rural strategy of the Chinese government and to ride on the development trends, the Group will incorporate agricultural e-commerce into the agricultural wholesale markets, to proceed with big data analysis by collecting, processing and analysing large amount of data from agricultural produce exchange markets for realization of effective data utilization. With the new project which came into operation in 2018, the Group at present managed a total of 11 agricultural wholesale markets situated in major cities across the PRC, and successfully builds a nationwide chain of wholesale markets and a network of modern agriculture produce logistics centre network, linking the southern and northern regions of China and across the eastern and south-western parts of China. The Group will actively explore development opportunities and new businesses with growth potential, and strive to create the greatest long-term value for our shareholders.

In 2018, the Group will continue to maintain a balance between its expansion and financial sustainability with a prudent pace of development. As always, we will adopt a cautious operation model and seek opportunities for business development and steadily forge a sustainable business environment to maximise the benefits to our shareholders and the agricultural industry.

SOCIAL RESPONSIBILITY

As a socially responsible corporation, the Group is committed to promoting sustainable business development. In 2017, the Group participated in the World No Tobacco Day 2017 – “Smoke-free Support Station” organized by the Hong Kong Council on Smoking and Health to promote a healthy living culture. In addition, the Group also participated in the Hong Kong and Kowloon Walks for Millions and Dress Casual Day organized by the Community Chest of Hong Kong to support family and child welfare services funded by the Community Chest, in hope to contribute our parts for a better community. For projects in China, the Group has adopted a proactive environmental protection strategy to ensure that our construction work and business operations comply with the environmental protection laws and regulations in the PRC. Please refer to the environmental, social and governance report in this annual report for details of the Group’s environmental protection, social and governance related work in 2017.

APPRECIATION

Finally, I would like to express my sincere gratitude to the Company’s shareholders, bondholders, customers and business partners for their continued trust and support over the past year. Meanwhile, I would also like to thank my fellow board members, the management team and staff members at all levels for their dedication and remarkable contribution to the growth of the Group.

Chan Chun Hong, Thomas
Chairman and Chief Executive Officer

Hong Kong, 6 March 2018